The US Justice Department has sued Apple and five publishers for fixing the prices of ebooks, an issue that's also been investigated by the European Union's antitrust arm.

Along with Apple, publishers HarperCollins, Macmillan, Penguin, Simon & Schuster and Hachette have been accused of colluding over the price of their ebooks when the market moved to agency pricing. This model allowed the publishers, rather than the ebook sellers, to set their ebooks prices.

Amazon's market dominance

Moving to agency pricing secured Apple a 30% cut of the ebooks it sold. Under the previous 'wholesale' model, Amazon had a reported 90% market-share and was able to set its own prices.

Amazon's slashed price ebooks were considered aggressively low, and a bid to boost the sale of the Amazon Kindle ereader, which is only compatible with ebooks in the proprietary format sold on Amazon.

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Settle or fight?

Following the charges from the US government, HarperCollins, Simon & Schuster and Hachette have all agreed to settle, but Apple, Macmillan and Penguin will fight the allegations.

As well as being investigated by the US government and European Union, Apple and the publishers also faced a class action suit from a group of plaintiffs. The European Commission has agreed to settle with Apple provided certain undisclosed concerns are addressed.

Allegations of collusion

The movement to agency pricing essentially stopped other retailers from being able to sell the publishers' books at a lower price from that offered by Apple. While agency pricing is legal, it was considered suspicious that the publishers all made the move at the same time and led to allegations of collusion, which is tantamount to price fixing.

Amazon has reportedly responded to the settlement by saying it will lower the prices of ebooks for its Kindle ebook reader.